FORMULATION OF THE RUSSELL-YASUDA KASAI FINANCIAL PLANNING MODEL

David R. Cariño and William T. Ziemba

Chapter 10 in Selected Works of William T Ziemba:A Memorial Volume, 2024, pp 169-185 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This paper describes the formulation of the Russell-Yasuda Kasai financial planning model, including the motivation for the model. The presentation complements the discussion of the technical details of the financial modeling process and the managerial impact of its use to help allocate the firm’s assets over time discussed in Cariño et al. (1994,1998, respectively). The multistage stochastic linear program incorporates Yasuda Kasai’s asset and liability mix over a five-year horizon followed by an infinite horizon steady-state end-effects period. The objective is to maximize expected long-run profits less expected penalty costs from constraint violations over the infinite horizon. Scenarios are used to represent the uncertain parameter distributions. The constraints represent the institutional, cash flow, legal, tax, and other limitations on the asset and liability mix over time.

Keywords: William Ziemba; Financial Planning Models; Racetrack Betting; Sports Analytics; Market Anomalies; Risk Factors (search for similar items in EconPapers)
JEL-codes: C44 C6 G11 G12 (search for similar items in EconPapers)
Date: 2024
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